In a move to align with its new strategic phase, SUNAC has initiated its first organizational restructuring of 2026.
The changes involve the dissolution of all its major regional structures, including North China, East China, South China, and Southwest China. The group will now directly manage over a dozen core city companies. Hainan, however, has been separated from the South China system and will operate independently.
This marks the official conclusion of the regional system that served as Sunac's primary operational framework for expansion over the past decade.
Within this series of changes, Hainan's strategic importance has been elevated, being singled out for independent operation. Founder Sun Hongbin may be using this to explore new approaches for the company's cultural tourism business.
End of an Era for the Regional System
In early June, Sunac appointed Executive President and Chengdu-Chongqing Region President Zhang Qiang to oversee the group's real estate segment.
The Chengdu-Chongqing region holds special significance for Sunac. Sun Hongbin has placed particular emphasis on the Southwest region, having stated in a shareholder meeting that he visited the area over 70 times in 2020.
In February 2022, Sunac began a restructuring, expanding from seven to nine major regions by establishing a new Northwest region and splitting the Southwest region into Chengdu-Chongqing and Yunnan-Guizhou. Zhang Qiang was transferred from the Yangtze River Delta to lead the Chengdu-Chongqing region, responsible for coordinating projects in cities like Chongqing and Chengdu.
At that time, the expansion and division of regions was seen as a move to position for a market recovery and deepen presence in high-potential areas. However, shortly after this expansion, the company encountered liquidity challenges. Zhang Qiang managed the region's operations through this difficult period.
His subsequent reassignment to oversee the broader real estate segment indicates that Sunac had been considering a reduced role for its major regional structures well before the recent formal changes.
The recent move to dissolve all major regional structures and have headquarters directly manage core city companies achieves multiple objectives. It flattens the organizational hierarchy, shortens decision-making chains, streamlines management layers, and centralizes authority at the headquarters level.
Furthermore, internal calculations reportedly showed that maintaining the regional structure incurred significant costs. Eliminating it could save approximately 1.17 billion yuan annually, an amount sufficient to cover interest payments on a corporate bond.
Sun Hongbin, however, did not apply a uniform approach, opting to carve out Hainan for independent operation.
Sunac's Hainan operations have unique characteristics. As far back as 2016, during a previous organizational change that added a regional layer, Hainan became one of eight key regions. Although it was later merged into the South China region due to policy shifts, years of operation have given it a solid foundation.
Analysis suggests Hainan benefits from the free trade port policy, and Sunac's local projects are primarily cultural tourism developments and project management contracts, which differ significantly from the residential development-focused model on the mainland.
Therefore, Hainan's independent operation is more conducive to exploring specialized development paths for cultural tourism.
After all, Sun Hongbin places considerable importance on the cultural tourism sector. At a late May shareholder meeting, he stated that Sunac has no plans to sell assets like its cultural tourism and snow projects. "The current prices are not high, so selling them wouldn't be meaningful, and the company remains optimistic about the 'better life' sector," he said.
He believes that selling long-term operating assets would only address the debts of a few specific projects and would not generate additional funds to solve the company's broader, long-term challenges.
A Prevailing Industry Trend
Some commentators suggest that Sunac's organizational restructuring has arrived somewhat later than others.
Prior to this, other major developers, including Poly Developments and Holdings, China Resources Land, China Overseas Land & Investment, and Grandjoy Holdings, have undergone similar adjustments of varying scales.
The common theme across these corporate restructurings has consistently been streamlining hierarchies and downsizing or eliminating regional companies.
For instance, Grandjoy Holdings recently announced the dissolution of its four major regional companies (North, East China, South China, Southwest) and their replacement with seven city companies directly managed by headquarters.
In February of this year, China Overseas Land & Investment also completely dissolved its four major regional companies (East China, South China, North, Mid-West), shifting from a three-tier "headquarters-region-city" management model to a two-tier "headquarters-city/area" structure, reorganizing 21 city companies based on geographic proximity.
This demonstrates that organizational restructuring is not exclusive to financially distressed developers but is rather an industry-wide trend.
The current Sunac has largely emerged from the most challenging phase of its debt restructuring.
In January of last year, its 15.4 billion yuan domestic debt restructuring plan received approval from relevant creditors. The plan is expected to reduce domestic debt by over 50%, with the remaining debt extended for up to 9.5 years, providing a five-year period without principal repayment pressure.
In December, its overseas debt restructuring plan took effect, resulting in the full discharge and release of approximately $9.6 billion in existing debt. Sunac became the first major developer to essentially clear its offshore debt.
On another front, the company completed the delivery of approximately 54,000 housing units last year and has delivered over 722,000 units cumulatively over the past four years.
With its debt restructuring plans finalized and its property delivery tasks substantially completed, Sunac appears to have freed up resources to focus on transitioning to a lighter-asset model and revitalizing projects.
Only by successfully revitalizing projects can the company generate more operating cash flow, which is essential for the final implementation of its debt restructuring agreements.
In its subsequent operations, the efficiency demonstrated by its new organizational structure will be a critical factor.
Comments